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WASHINGTON Nov 6 (Reuters) - Debt collectors using text
messages and social media to pursue delinquent borrowers could
come under new scrutiny as the U.S. consumer financial watchdog
warns of new rules as part of a crackdown on the collection
industry.

The Consumer Financial Protection Bureau said on Wednesday
that before it formally proposes any rules, it wants to hear how
collectors verify borrowers' information and communicate with
consumers.

Among questions it is asking consumers, banks and the
collection industry is whether there could be privacy concerns
or other harm from being contacted by and responding to debt
collectors via text message, social media or other
Internet-based tools.

Regulators have already warned debt collectors in recent
months against misleading borrowers in their efforts to collect
payments. Wednesday's announcement showed the consumer bureau,
which was created in 2010, gradually moving to ramp up scrutiny.

"Now it is time to look closely at how we can improve and
modernize existing measures that were written before the
Internet, before social media, and before many other new
communication technologies," Cordray said.

"We are seeking to hear from the public...about what works
and what does not in the current debt collection market," he
said.

The consumer bureau was created by the 2010 Dodd-Frank law
and charged with overseeing credit cards, mortgages and other
products. After it opened in 2011, the bureau dove into mortgage
rules and other Dodd-Frank requirements. With those rules out of
the way, consumer officials have been broadening their focus.

About one in 10 Americans came out of the 2007-2009
financial crisis with some debt in collection, the bureau said.

Debt collectors include banks that try to get borrowers to
pay them back, as well as outside firms that collect debts on
behalf of creditors.

Some third-party collectors charge lenders a fee to recover
money from delinquent borrowers. Others buy the debt and keep
whatever they can recover or collect money through litigation.

The consumer bureau began supervising larger debt collectors
earlier this year. It has already warned that it will crack down
on collectors who mislead consumers, which is illegal under the
Fair Debt Collection Practices Act.

Regulators levied a record fine in July on Expert Global
Solutions, the world's largest debt collection agency,
for harassing people who owed money.

Other big collectors include Encore Capital Group Inc
and Asset Acceptance Capital Corp.

PROPOSING RULES

Consumer bureau staff members did not give a timeline for
when they might propose rules. They said they would probably
convene a small business panel to discuss potential rules first.

They said parts of the debt collection law have only been
applied to third-party collectors so far. New rules could expand
borrower protections to cover banks that try to collect debts
themselves, the officials said.

The bureau began this summer accepting complaints from
borrowers about their treatment by debt collectors and will add
those comments to a database on its website, Cordray said.

He said regulators want to know more about whether rules
governing how and when collectors can contact borrowers are
adequate. Collection firms reach out to consumers using email,
social media sites such as Facebook, and other new technologies.

The bureau also wants to make sure borrowers get clear
information about debts that are being collected and to hear how
outside collectors ensure they pursue the right consumer for the
correct amount of money, Cordray said.

Consumers, creditors, debt collectors and others will have
90 days to submit information about the industry.